Euro crisis: “the EU is setting itself up for failure”

In a lengthy article posted at Crooked Timber, John Quiggin and Henry Farrell argue that

By concentrating on its economic problems but ignoring their political consequences, the EU is setting itself up for failure. The case for austerity does not make sense. And if the EU fails to deal with the political fallout of its own institutional weaknesses, it is going to collapse. No political body can force voters to repeatedly shoulder the costs of adjustment on their own and expect to remain legitimate. During the gold standard, nation-states tried this and failed—and they had considerably more authority than the EU has today. Hard Keynesianism offers a means to combine fiscal discipline with flexibility in order to cushion the political costs of adjustment in times of economic stress. EU leaders must institute it in a hurry.

And while that article focuses on the eurozone crisis, French President Nicolas Sarkosy and Italian PM Silvio Berlusconi have called for reform of the Schengen Treaty – which allows free travel within most of the eurozone.

BBC Europe editor, Gavin Hewitt, makes a pertinent point about reforming “one of the cornerstones of the European project”

The French and Italian leaders are each under pressure. They may agree on a joint appeal to review Schengen, to clarify how the agreement applies to the movement of significant numbers of people. But their interests differ. The Italians want the review to get others to “burden-share” ; the French want to keep the migrants out.

The real tension here is that EU principles are increasingly seen as at odds with economic reality and the wishes of a majority of the people. Appeals to solidarity do not sit well with the voters. The dilemma is similar to that of the bail-outs. In order to keep the euro together Brussels is supporting policies that alienate many voters.  [added emphasis]

As I said previously, the question is, do they still all know what to do?  Even if they can’t get re-elected once they’ve done it?

Or will domestic political pressures, in Ireland and elsewhere, hold sway?

And with what result…?

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